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What is the value of sell-side analysts? Evidence from coverage changes – A discussion

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  • Hansen, Robert S.

Abstract

Li and You (this volume) study public firms’ common stock return reactions to two events: when analysts’ initiate coverage of the firm and when they terminate coverage. They test the returns for evidence of three sources of value added by analysts: (1) more monitoring of the firm, (2) reduced information asymmetry about the firm, and (3) greater demand for the firm’s common stock. They find consistent support for analysts adding value by increasing demand, but not monitoring or by reducing information asymmetry. Their findings also indicate that analysts’ initiations supply little new information. I review these findings, put them in perspective with related research, and note research directions.

Suggested Citation

  • Hansen, Robert S., 2015. "What is the value of sell-side analysts? Evidence from coverage changes – A discussion," Journal of Accounting and Economics, Elsevier, vol. 60(2), pages 58-64.
    • Handle: RePEc:eee:jaecon:v:60:y:2015:i:2:p:58-64
    DOI: 10.1016/j.jacceco.2015.08.005
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    Cited by:

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    2. Elena Gerasimova B. & Елена Герасимова Борисовна, 2018. "Стандартизированный подход к анализу устойчивости деятельности организации // Standardized Approach to the Analysis of the Sustainability of the Organization Activity," Учет. Анализ. Аудит // Accounting. Analysis. Auditing, ФГОБУВО "Финансовый университет при Правительстве Российской Федерации" // Financial University under The Government of Russian Federation, vol. 5(2), pages 44-51.
    3. Andrikopoulos, Athanasios & Zheng, Min, 2023. "A dynamic analysis of the neglected firm effect," International Review of Financial Analysis, Elsevier, vol. 85(C).
    4. Dambra, Michael & Field, Laura Casares & Gustafson, Matthew T. & Pisciotta, Kevin, 2018. "The consequences to analyst involvement in the IPO process: Evidence surrounding the JOBS Act," Journal of Accounting and Economics, Elsevier, vol. 65(2), pages 302-330.

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    More about this item

    Keywords

    Coverage initiation; Exogenous coverage termination; Financial analysts; Firm value; Investor recognition; Information asymmetry; Security analysts;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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